Major Investor Group Releases Draft Plan for Risk Standards

A group of institutional investors, including representatives of the California Public Employees Retirement System and Pacific Telesis Group’s pension fund, has drafted a set of proposed risk-management standards to help the industry avoid debacles like the Orange County bankruptcy and the collapse of Britain’s Barings Bank.

The 33 draft guidelines call for, among other things, fund investments to be “marked to market,” or formally valued, with far more frequency than is now common. They also recommend that institutions monitor their fund managers more carefully and gauge performance in relation to the riskiness of the investments, not just the absolute return.

The 11-member group--calling itself the Risk Standards Working Group and representing pension funds, insurance companies, foundations and endowments that together oversee more than $250 billion in assets--announced Tuesday that it is seeking comment on its proposals from 100 other institutions and regulatory agencies with the goal of publishing a final list of standards in September.

The guidelines were not released publicly, although group members did discuss them in interviews with The Times on Tuesday. The standards would not have the force of law, but they could influence rule making by regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission.

A string of recent incidents has exposed the lack of controls that huge investment funds often have over how their money is handled.